In actuality this commonly occurs when it is being locked in by explorer.exe or one of the components of Windows media player, or whatever else is used to view the clip. this can happen if you attempt to delete the file while the preview is being played in web viewed folders( where you have a lil windows that can play the movie or mp3).

I've run into this issues several times, and yes rebooting to safe mode works to delete it, however and easier way to do this is to simply open a DOS/Command prompt window and manually delete the file, as booting to safe mode does not always work.

Even if Kazaa was running explorer wills till attempt to close the file and with 2.0 lite, you will be prompted that Kazaa is using the file, however from his description this is not the case and it appears that explorer is the one giving the error code.